Chinese investment fund GO Scale Capital will use its $2.8 billion winning bid for Philips's lighting unit as a model to pursue other potential takeovers in areas such as biomedicine and clean energy, its executives said.
Beijing-based GO Scale has roped in well-connected China Internet and green technology investors, such as GSR Ventures and billionaire solar magnate Cheng Kin Ming. U.S-based Oak Investment Partners is also a backer of the fund.
The last-minute Philips bid trumped marquee buyout firms, including a joint offer by KKR & Co and CVC Capital and a separate one from Bain Capital, driving home the reality that a new breed of Chinese suitors with deep business connections and confidence to strike global deals are here to stay.
GO Scale Capital is now seeking acquisitions in life sciences and new materials among others, which would help propel the little-known Chinese investment shop to the global stage.
"It's a model for us in the future, linking up global resources with the China market," Cheng told a media conference, referring to the Philips deal.
GSR Ventures has about $1 billion under management, while bigger partner Oak has invested $9 billion since it was founded nearly 40 years ago. The two companies have previously jointly invested in LED lighting firm SunSun Lighting and battery maker Boston Power, where Cheng is also an investor, among others.
GO Scale expects to generate about five times return on its initial investment in the Philips unit, called Lumileds, said Sonny Wu, chairman of GO Scale.
GO Scale said the acquisition will be financed in part with its own funds, funds from Cheng's Asia Pacific Resources Development Investment Ltd, unnamed institutional partners and investors that have participated in GSR and Oak's funds.
Like other Chinese acquirers of global companies and brands, GO Scale plans to tap into demand from mainland China.
China has huge potential market for a lot of clean technologies that could use the local market to gain scale before being used globally, Allan Kwan, a venture partner of Oak, said in an interview.
"The future is more about consolidation of the industry. For example, Philips Lumileds could be the platform to start to absorb potential technologies or industry players that can help it grow even faster," added Kwan, who was part of Yahoo! International when the U.S. Internet giant made a $1.7 billion investment in Alibaba.com in 2005 before he joined Oak.
